Taking the Plunge

And the markets come down, as inevitably as they once went up. Most of us, disciples of Motivator and (mostly) passive investing, take a deep breath and take this in our stride. “We’re in it for the long term”, we tell ourselves, finger hovering over the “Sell” button. Many of us have been here before, the dot com crash and Lehman Brothers in 2008 being our two watershed examples. But, in my days of yore, thoughts of selling out, or de-risking my portfolio into bonds and other less volatile instruments were just not a consideration. I had years – years I tell you – to watch the market recover, so I kept up the monthly payment plan while chanting the mantra “Pound Cost Averaging, Pound Cost Averaging”.

So, today finds me trying to reframe time. I turn 55 this year which, I now tell myself, will be the start of my serious investing life. It won’t be time to cash in any big slugs of my investments because that would be silly. This, of course, is the complete reverse of what I was telling myself two weeks ago when I was hoping the Trump Bump would last at least another year, just long enough for me to maximise my tax free lump sum out of my DC pension pot. Then, with the Dow Jones possibly slowing as it approached 30,000, pulling all markets in its glorious wake, I would “take profits”.

Well, it seems it was a nice idea, despite the fact that when November arrived, and if the Dow was closing in at 30,000, I know I’d be thinking, “32,000 is a better number to cash in at”. This psychology is a great way to drive yourself nuts and, I feel, is directly connected to my inability, or severe reluctance, to spend money. I’ve been regularly investing for almost twenty five years with, on a monthly basis, at least 10% of my net income being salted away into Index Trackers. Sometimes it was a lot more than that percentage. After the bills were paid, I “squirreled away” any excess cash as, for me, this was the singular most satisfying thing I could do with the money.

Recently, however, the day came when I could no longer find that incremental income, unless I started to cut my costs.  I was, and am, reluctant to do this, comfortable as I am with the way I live today. Therefore, when the markets plunge downward, I’d be lying if I said I wasn’t twitching, wondering where it could end and whether or not it will recover. I’ve seen it before, I say, but are we not in new territory here, what with all that QE about to disappear and only the hangover to live with? Didn’t Japan stagnate for twenty years following their own bout of irrational exuberance? Will the Remoaners have their day in the sun, dancing in the ruins of the British economy while tweeting “Told you so!”?

Maybe. But 55 is young. I can work for another 20 years if someone will have me. And if they won’t, I can consider doing without for a time, take pleasure and satisfaction from the things in life that you’re supposed to, the things that don’t rely on money to power them. In the end, the markets will come back, I’m pretty sure of that. It may take ten days, ten months or ten years, but eventually the ship will right itself (probably!) In a way, this “correction” is a timely reminder that there’s more to life than fretting or celebrating over the Dow Jones or the FTSE or Emerging Markets, and that it’s a useful signal to focus on things outside of them for a while.   

 

13 thoughts on “Taking the Plunge

  1. “Will the Remoaners have their day in the sun, dancing in the ruins of the British economy while tweeting “Told you so!”
    I doubt anyone would be dancing. I voted to remain in the EU because I didn’t want to see this country’s economy in ruins.

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  2. Sensible thoughts. I’m just a few years younger, 49 last birthday with much the same view on life as this post expresses. I’m stopping my “proper” work in just 7 or 8 weeks now, and going to spend a long summer doing stuff I love. Which may turn into a way to make pocket money, or it may not. But when you have maybe 15 or 20 summers to go with vitality and strength before the demon health problems can be expected, I ain’t waiting. Maybe less than 15-20. Sure, maybe more, but it would be daft to count on that. No One More Year here.

    But I know full well I will be bored come October or November, when the weather turns horrible. So if the markets are being a bit disobliging still, maybe I’m more likely to try for another few months of real work rather than sloping off to a nicer climate. And that could turn into another play at the career game, or not. Whichever seems right at the time.

    This is all in the box labelled “first world problems”. Hmm, should I work a bit more to make some extra shekels, or limit my lifestyle a bit? I’m b***y lucky to have the opportunity to fret about this stuff.

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    • I agree ratspook, my blog sits firmly in the category of “first world problems”, but what can you do? I know that seldom a day goes by at the office where I don’t reflect, happily, that I’m choosing to be there, unlike a lot of others, and it makes a big difference. I’m there as long as I’m happy to be there, and for as long as that feeling is reciprocated.

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  3. I may be in the minority here (not an unusual occurrence) however I want a crash now. Selfish I know, but it suits my plans perfectly as I’m aiming to be FI in 3 years, and sequence of returns risk is kinda scaring me now.

    So let the markets fall when I’m earning, I’ll keep buying each month and then recover when I’m ready to quit.

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    • You may be lucky Ms Zi You, then again, you may not be. As they say ‘hope for the best, plan for the worst’. Most rational financial planning strategies assumes all (okay, maybe most) outcomes so you don’t have to rely on the fickle nature of the markets!

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  4. Some interesting thoughts. Being less than five years into my fire journey, personally I’m all for this correction turning into a crash while the pound somehow rallies back towards $2 like it was in 2006 making the 500 super cheap. However as a teacher who has had a real terms pay cut every year since 2010 and therefore lost about £6,000 in earnings, I know there are human victims of any economic crash. Humans who did nothing to cause it. So whilst we who are “enlightened” about the patient way to escape the duldrums of forced work salivate at the thought of a stock market on sale, there are many good honest hard working people who will receive a pay cut or a redundancy notice as a result of such a crash, and many children thrust into poverty.

    The first will inevitably happen properly when interest rates do actually go up in the west, the second if the BofE raise rates first and Brexit is a success….and let’s face it….who really knows on this one?

    Did we purchase our flat at a good time? Only time will decide if that is so, and that will depend on any economic or political changes that will force us into any sale. If we successfully get our tenants to pay off the mortgage, then history will judge it as a good investment.

    I say ignore the noise, just keep buying and holding income producing assets, never sell and structure your affairs to pass them onto your kids for nowt…

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  5. “I say ignore the noise, just keep buying and holding income producing assets, never sell and structure your affairs to pass them onto your kids for nowt…” – couldn’t agree more!

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    • Yep…my vanguard us equity index tracker may be costing me a lot considering inflated prices and a shitty pound but buying shares in that every month will be better for my family long term than heading into town once a month and dropping a grand on designer clothes and gadgets..

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